![]() | Exhibit 99.2 |
CSX REPORTS FOURTH QUARTER 2003 RESULTS
• | Fourth-quarter net income was $123 million, 57 cents per share, including a net restructuring charge of $12 million pretax ($7 million after tax), or 4 cents per share for the company’s management streamlining efforts. |
• | Surface Transportation revenues rose 4% to $1.90 billion compared to last year’s fourth quarter. |
• | Surface Transportation operating income was $239 million including the net restructuring charge. |
JACKSONVILLE, Fla., January 27, 2004 – CSX Corporation (NYSE: CSX) today reported fourth quarter net income of $123 million, or 57 cents per share, including a net after-tax restructuring charge of $7 million or 4 cents per share. Excluding this charge, fourth quarter net income was $130 million, or 61 cents per share, versus $137 million or 64 cents, a year ago.
Surface Transportation revenue, which includes CSX’s rail and intermodal units, was $1.90 billion versus $1.82 billion a year ago. The company’s merchandise markets all showed strong year-over-year growth with revenue and volume up 6%. Coal and Intermodal volumes also increased year over year. Total CSX revenues for the quarter were $1.95 billion compared to $2.06 billion in 2002. The prior year includes revenue of $189 million from an affiliated company conveyed earlier this year.
“CSX saw tremendous revenue growth in the fourth quarter and throughout 2003. This growth reflects a strengthening economy, aggressive efforts to win modal conversions and innovative service products that better adapt to customer needs,” said Michael J. Ward, CSX Corporation chairman and chief executive officer. “In addition, we strengthened our balance sheet through a reduced debt-to-equity ratio and free cash flow in excess of $300 million or 80% increase year over year.”
“However, because these positive trends were offset by continued high operational costs, we remain keenly focused on improving our cost structure and restoring our higher service levels that we’ve seen in the recent past,” Ward said.
Operating income for Surface Transportation was $239 million. Excluding the net restructuring charge mentioned above operating income was $251 million for the quarter, down from $281 million in the same quarter last year. On a consolidated basis excluding the net restructuring charge, operating income was $274 million versus $318 million in 2002.
RECAP OF RESULTS (reconciliation to GAAP):
(Dollars in millions, except per share amounts)
4th QTR | Year | ||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||
Surf Trans Oper Inc | $ | 239 | $ | 281 | $ | 651 | $ | 995 | |||||
Charges | 12 | — | 251 | — | |||||||||
Adj Surf Trans Oper Inc | $ | 251 | $ | 281 | $ | 902 | $ | 995 | |||||
Net Earnings | $ | 123 | $ | 137 | $ | 246 | $ | 424 | |||||
Charges | 7 | — | 225 | — | |||||||||
Cumulative Effect | — | — | (57 | ) | 43 | ||||||||
Adj Net Earnings (bef cum effect) | $ | 130 | $ | 137 | $ | 414 | $ | 467 | |||||
EPS | $ | 0.57 | $ | 0.64 | $ | 1.14 | 1.99 | ||||||
Charges | 0.04 | — | 1.06 | — | |||||||||
Cumulative Effect | — | — | (.26 | ) | .20 | ||||||||
Adj EPS (bef cum effect) | $ | 0.61 | $ | 0.64 | $ | 1.94 | $ | 2.19 |
CSX Corporation, based in Jacksonville, Fla., owns one of the largest rail networks in the United States. CSX Transportation Inc., and its 34,000 employees provide rail transportation services over a 23,000 route-mile network in 23 states, the District of Columbia and two Canadian provinces. CSX Corporation also provides intermodal and global container terminal operations through other subsidiaries.
This press release and other statements by the Company contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, cost-savings, expenses, or other financial items; statements of management’s plans, strategies and objectives for future operation, and management’s expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “project,” and similar expressions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by these forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others: (i) the Company’s success in implementing its financial and operational initiatives, (ii) changes in domestic or international economic or business conditions, including those affecting the rail industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; and (iv) the outcome of claims and litigation involving or affecting the Company. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the Company’s SEC reports, accessible on the SEC’s website at www.sec.gov and the Company’s website at www.csx.com.
500 Water Street
15th Floor, C900
Jacksonville, FL 32202
http://www. csx.com
Contact:
Peter Mills
(904) 359-3184
TABLE OF CONTENTS
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The accompanying unaudited financial information should be read in conjunction with the Company’s 2002 Annual Report on Form 10-K, 2003 Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.
1
CSX Corporation and Subsidiaries | QuarterlyFlash | |
CONSOLIDATED INCOME STATEMENTS |
(Dollars in Millions, Except Per Share Amounts)
Quarters Ended | Years Ended | ||||||||||||||
Dec. 26, 2003 | Dec. 27, 2002 | Dec. 26, 2003 | Dec. 27, 2002 | ||||||||||||
(Unaudited) | |||||||||||||||
Revenue and Expense | Operating Revenue | $ | 1,953 | $ | 2,060 | $ | 7,793 | $ | 8,152 | ||||||
Operating Expense | 1,691 | 1,742 | 7,167 | 7,025 | |||||||||||
Operating Income | 262 | 318 | 626 | 1,127 | |||||||||||
Other Income | 27 | — | 57 | 41 | |||||||||||
Interest Expense | 107 | 107 | 418 | 445 | |||||||||||
Earnings | Earnings Before Income Taxes and Cumulative Effect of Accounting Change | 182 | 211 | 265 | 723 | ||||||||||
Income Tax Expense | 59 | 74 | 76 | 256 | |||||||||||
Earnings Before Cumulative Effect of Accounting Change | 123 | 137 | 189 | 467 | |||||||||||
Cumulative Effect of Accounting Change - Net of Tax | — | — | 57 | (43 | ) | ||||||||||
Net Earnings | $ | 123 | $ | 137 | $ | 246 | $ | 424 | |||||||
Per Common Share | Earnings Per Share, Assuming Dilution: | ||||||||||||||
Before Cumulative Effect of Accounting Change | $ | 0.57 | $ | 0.64 | $ | 0.88 | $ | 2.19 | |||||||
Cumulative Effect of Accounting Change | — | — | 0.26 | (0.20 | ) | ||||||||||
Net Earnings | $ | 0.57 | $ | 0.64 | $ | 1.14 | $ | 1.99 | |||||||
Average Diluted Common Shares Outstanding (Thousands) | 214,742 | 213,690 | 214,396 | 213,512 | |||||||||||
Cash Dividends Paid Per Common Share | $ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.40 | |||||||
Notes to Consolidated Financial Statements
(1) | Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” was issued in 2001. In conjunction with the group-life method of accounting for asset costs, the Company historically accrued crosstie removal costs as a component of depreciation, which is not permitted under SFAS 143. With the adoption of SFAS 143 in fiscal year 2003, CSX recorded pretax income of $93 million, $57 million after tax, or 26 cents per share, as a cumulative effect of an accounting change in the first quarter, representing the reversal of the accrued liability for crosstie removal costs. The adoption of SFAS 143 did not have a material effect on prior reporting periods, and the Company does not believe it will have a material effect on future earnings. On an ongoing basis, depreciation expense will be reduced, while labor and fringe and materials, supplies and other expense will be increased. |
(2) | In February 2003, CSX conveyed most of its interest in its domestic container-shipping subsidiary, CSX Lines LLC (“CSX Lines”), to a new venture formed with the Carlyle Group for approximately $300 million (gross cash proceeds of approximately $240 million, $214 million net of transaction costs and $60 million of securities). CSX Lines was subsequently renamed Horizon Lines LLC (“Horizon”). A deferred pretax gain of approximately $127 million as a result of the transaction will be recognized over the 12-year sub-lease term. Horizon has subleased equipment from certain affiliates of CSX covering the primary financial obligations related to $300 million of vessel and equipment leases under which CSX or one of its affiliates will remain a lessee or guarantor. |
(3) | SFAS 142, “Goodwill and Other Intangible Assets,” was issued in 2001. The Company adopted this standard at the beginning of fiscal year 2002 and incurred a pretax charge of $83 million, $43 million after tax and consideration of minority interest, 20 cents per share, as a cumulative effect of an accounting change, which represents the difference between book value and the fair value of indefinite lived intangible assets. These indefinite lived intangible assets are permits and licenses that the Company holds relating to a proposed pipeline to transfer natural gas from Alaska’s north slope to the port in Valdez, Alaska. The fair value was determined using a discount method of projected future cash flows relating to these assets. The carrying value of these assets is now approximately $3 million. The adoption of SFAS 142 did not have a material effect on prior reporting periods and is not expected to have a material effect on future earnings. |
(4) | In the third quarter of 2003, the Company changed its estimate of casualty reserves to include an estimate of incurred but not reported claims for asbestos and other occupational injuries to be received over the next seven years. In conjunction with the change in estimate, the Company recorded a charge of $232 million, $145 million after tax, 68 cents per share, in the third quarter of 2003 to increase its provision for casualty claims. |
(5) | Also in the third quarter of 2003, CSX entered into two settlement agreements with Maersk that resolved all material disputes pending between the companies arising out of the 1999 sale of the international container-shipping assets. The effect was to reduce the Company’s earnings by $108 million pretax, $67 million after tax, or 31 cents per share. This charge is reflected in the financial statements as the additional loss on sale of the international container-shipping assets. |
(6) | In the fourth quarter of 2003, the Company recorded $34 million pretax, $21 million after tax, 10 cents per share, as the initial charge for separation expenses related to the Organizational Effectiveness Initiative announced in November 2003. In addition, the Company recorded a $22 million pretax, $14 million after tax, 6 cents per share, credit related to revised estimates for railroad retirement taxes and the amount of benefits that will be paid to individuals under the $1.3 billion charges for separation plans initially recorded in 1991 and 1992. For the year, the Company has recorded a net restructuring charge of $22 million, $13 million after tax or 7 cents per share, that includes these items and an additional separation charge that was included in the third quarter results. |
2
CSX Corporation and Subsidiaries | QuarterlyFlash | |
CONSOLIDATED BALANCE SHEETS |
(Dollars in Millions)
Dec. 26, 2003 | Dec. 27, 2002 | |||||||||
(Unaudited) | ||||||||||
Assets | Current Assets | |||||||||
Cash, Cash Equivalents and Short-term Investments | $ | 368 | $ | 264 | ||||||
Accounts Receivable - Net | 1,163 | 845 | ||||||||
Materials and Supplies | 170 | 180 | ||||||||
Deferred Income Taxes | 136 | 128 | ||||||||
Other Current Assets | 63 | 155 | ||||||||
Domestic Container-Shipping Assets Held for Disposition | — | 263 | ||||||||
Total Current Assets | 1,900 | 1,835 | ||||||||
Properties - Net | 13,730 | 13,286 | ||||||||
Investment in Conrail | 4,678 | 4,653 | ||||||||
Affiliates and Other Companies | 515 | 381 | ||||||||
Other Long-term Assets | 922 | 807 | ||||||||
Total Assets | $ | 21,745 | $ | 20,962 | ||||||
Liabilities | Current Liabilities | |||||||||
Accounts Payable | $ | 827 | $ | 802 | ||||||
Labor and Fringe Benefits Payable | 397 | 457 | ||||||||
Casualty, Environmental and Other Reserves | 280 | 246 | ||||||||
Current Maturities of Long-term Debt | 426 | 391 | ||||||||
Short-term Debt | 2 | 143 | ||||||||
Income and Other Taxes Payable | 123 | 144 | ||||||||
Other Current Liabilities | 164 | 178 | ||||||||
Domestic Container-Shipping Liabilities Held for Disposition | — | 104 | ||||||||
Total Current Liabilities | 2,219 | 2,465 | ||||||||
Casualty, Environmental and Other Reserves | 836 | 604 | ||||||||
Long-term Debt | 6,886 | 6,519 | ||||||||
Deferred Income Taxes | 3,742 | 3,567 | ||||||||
Other Long-term Liabilities | 1,621 | 1,566 | ||||||||
Total Liabilities | 15,304 | 14,721 | ||||||||
Shareholders’ Equity | Common Stock, $1 Par Value | 215 | 214 | |||||||
Other Capital | 1,567 | 1,548 | ||||||||
Retained Earnings | 4,957 | 4,797 | ||||||||
Accumulated Other Comprehensive Loss | (298 | ) | (318 | ) | ||||||
Total Shareholders’ Equity | 6,441 | 6,241 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 21,745 | $ | 20,962 |
3
CSX Corporation and Subsidiaries | QuarterlyFlash | |
CONSOLIDATED CASH FLOW STATEMENTS | ||
(Dollars in Millions) |
Years Ended | ||||||||||
Dec.26, 2003 | Dec.27, 2002 | |||||||||
(Unaudited) | ||||||||||
Operating Activities | Net Earnings | $ | 246 | $ | 424 | |||||
Adjustments to Reconcile Net Earnings to Net Cash Provided: | ||||||||||
Depreciation | 643 | 649 | ||||||||
Deferred Income Taxes | 119 | 172 | ||||||||
Cumulative Effect of Accounting Change - Net of Tax | (57 | ) | 43 | |||||||
Additional Loss on Sale | 108 | — | ||||||||
Provision for Casualty Reserves | 232 | — | ||||||||
Restructuring Charge - Net | 22 | — | ||||||||
Other Operating Activities | (108 | ) | (108 | ) | ||||||
Changes in Operating Assets and Liabilities: | ||||||||||
Accounts Receivable | 19 | 30 | ||||||||
Termination of Sale of Receivables | (380 | ) | — | |||||||
Other Current Assets | 40 | 23 | ||||||||
Accounts Payable | 49 | (83 | ) | |||||||
Other Current Liabilities | (129 | ) | (23 | ) | ||||||
Net Cash Provided by Operating Activities | 804 | 1,127 | ||||||||
Investing Activities | Property Additions | (1,059 | ) | (1,080 | ) | |||||
Net Proceeds from Divestitures | 214 | — | ||||||||
Short-term Investments - Net | 65 | 350 | ||||||||
Other Investing Activities | (27 | ) | (45 | ) | ||||||
Net Cash Used by Investing Activities | (807 | ) | (775 | ) | ||||||
Financing Activities | Short-term Debt - Net | (141 | ) | 140 | ||||||
Long-term Debt Issued | 919 | 748 | ||||||||
Long-term Debt Repaid | (500 | ) | (1,159 | ) | ||||||
Dividends Paid | (86 | ) | (86 | ) | ||||||
Other Financing Activities | (20 | ) | (5 | ) | ||||||
Net Cash Provided (Used) by Financing Activities | 172 | (362 | ) | |||||||
Cash, Cash Equivalents and Short-term Investments | Net Increase (Decrease) in Cash and Cash Equivalents | 169 | (10 | ) | ||||||
Cash and Cash Equivalents at Beginning of Period | 127 | 137 | ||||||||
Cash and Cash Equivalents at End of Period | 296 | 127 | ||||||||
Short-term Investments at End of Period | 72 | 137 | ||||||||
Cash, Cash Equivalents and Short-term | ||||||||||
Investments at End of Period | $ | 368 | $ | 264 |
4
CSX Corporation and Subsidiaries | QuarterlyFlash | |
BUSINESS SEGMENTS (Unaudited)(1) | ||
(Dollars in Millions) | ||
Quarters Ended Dec. 26, 2003, and Dec. 27, 2002 |
Rail | Intermodal | Surface Transportation | International Terminals | Eliminations/ Other(2) | Total | |||||||||||||||||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 1,568 | $ | 1,506 | $ | 328 | $ | 309 | $ | 1,896 | $ | 1,815 | $ | 57 | $ | 56 | $ | — | $ | 189 | $ | 1,953 | $ | 2,060 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 636 | 638 | 19 | 18 | 655 | 656 | 13 | 12 | — | 61 | 668 | 729 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 341 | 266 | 57 | 48 | 398 | 314 | 21 | 18 | 6 | 69 | 425 | 401 | ||||||||||||||||||||||||||||||||||||
Conrail Rents, Fees and Services | 83 | 74 | — | — | 83 | 74 | — | — | — | — | 83 | 74 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 110 | 99 | 36 | 33 | 146 | 132 | 2 | 2 | (4 | ) | 4 | 144 | 138 | |||||||||||||||||||||||||||||||||||
Inland Transportation | (102 | ) | (94 | ) | 175 | 167 | 73 | 73 | — | 1 | — | 29 | 73 | 103 | ||||||||||||||||||||||||||||||||||
Depreciation | 141 | 154 | 9 | 7 | 150 | 161 | 2 | 2 | 2 | 5 | 154 | 168 | ||||||||||||||||||||||||||||||||||||
Fuel | 140 | 124 | — | — | 140 | 124 | — | — | — | 19 | 140 | 143 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 2 | (3 | ) | (10 | ) | (11 | ) | (8 | ) | (14 | ) | |||||||||||||||||||||||||||||||
Restructuring Charge Net(5) | 12 | — | — | — | 12 | — | — | — | — | — | 12 | — | ||||||||||||||||||||||||||||||||||||
Total Operating Expense | 1,361 | 1,261 | 296 | 273 | 1,657 | 1,534 | 40 | 32 | (6 | ) | 176 | 1,691 | 1,742 | |||||||||||||||||||||||||||||||||||
Operating Income (Loss) | $ | 207 | $ | 245 | $ | 32 | $ | 36 | $ | 239 | $ | 281 | $ | 17 | $ | 24 | $ | 6 | $ | 13 | $ | 262 | $ | 318 | ||||||||||||||||||||||||
Operating Ratio | 86.8 | % | 83.7 | % | 90.2 | % | 88.3 | % | 87.4 | % | 84.5 | % | 70.2 | % | 57.1 | % | ||||||||||||||||||||||||||||||||
Years Ended Dec. 26, 2003, and Dec. 27, 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||
Rail | Intermodal | Surface Transportation | International Terminals | Eliminations/ Other(2) | Total | |||||||||||||||||||||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||
Operating Revenue | $ | 6,182 | $ | 6,003 | $ | 1,257 | $ | 1,180 | $ | 7,439 | $ | 7,183 | $ | 226 | $ | 236 | $ | 128 | $ | 733 | $ | 7,793 | $ | 8,152 | ||||||||||||||||||||||||
Operating Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor and Fringe | 2,555 | 2,530 | 73 | 67 | 2,628 | 2,597 | 51 | 57 | 61 | 232 | 2,740 | 2,886 | ||||||||||||||||||||||||||||||||||||
Materials, Supplies and Other | 1,329 | 1,212 | 201 | 179 | 1,530 | 1,391 | 76 | 77 | 56 | 256 | 1,662 | 1,724 | ||||||||||||||||||||||||||||||||||||
Conrail Rents, Fees and Services | 342 | 322 | — | — | 342 | 322 | — | — | — | — | 342 | 322 | ||||||||||||||||||||||||||||||||||||
Building and Equipment Rent | 418 | 425 | 144 | 131 | 562 | 556 | 8 | 9 | (4 | ) | 36 | 566 | 601 | |||||||||||||||||||||||||||||||||||
Inland Transportation | (399 | ) | (365 | ) | 697 | 633 | 298 | 268 | 6 | 7 | 16 | 95 | 320 | 370 | ||||||||||||||||||||||||||||||||||
Depreciation | 579 | 576 | 32 | 29 | 611 | 605 | 9 | 9 | 9 | 24 | 629 | 638 | ||||||||||||||||||||||||||||||||||||
Fuel | 566 | 449 | — | — | 566 | 449 | — | — | 15 | 66 | 581 | 515 | ||||||||||||||||||||||||||||||||||||
Miscellaneous | — | — | — | — | — | — | 7 | 8 | (42 | ) | (39 | ) | (35 | ) | (31 | ) | ||||||||||||||||||||||||||||||||
Provision for Casualty Claims(3) | 229 | — | — | — | 229 | — | — | — | 3 | — | 232 | — | ||||||||||||||||||||||||||||||||||||
Additional Loss on Sale(4) | — | — | — | — | — | — | — | — | 108 | — | 108 | — | ||||||||||||||||||||||||||||||||||||
Restructuring Charge - Net(5) | 22 | — | — | — | 22 | — | — | — | — | — | 22 | — | ||||||||||||||||||||||||||||||||||||
Total Operating Expense | 5,641 | 5,149 | 1,147 | 1,039 | 6,788 | 6,188 | 157 | 167 | 222 | 670 | 7,167 | 7,025 | ||||||||||||||||||||||||||||||||||||
Operating Income (Loss) | $ | 541 | $ | 854 | $ | 110 | $ | 141 | $ | 651 | $ | 995 | $ | 69 | $ | 69 | $ | (94 | ) | $ | 63 | $ | 626 | $ | 1,127 | |||||||||||||||||||||||
Operating Ratio | 91.2 | % | 85.8 | % | 91.2 | % | 88.1 | % | 91.2 | % | 86.1 | % | 69.5 | % | 70.8 | % |
(1) | Prior periods have been reclassified to conform to the current presentation. |
(2) | Eliminations/Other consists of the following: |
(a) | Charge incurred upon entering into settlement agreements with Maersk |
(b) | Reclassification of International Terminals minority interest expense |
(c) | Operations of CSX Lines and gain amortization |
(d) | Expenses related to the 2003 retirement of the Company’s former Chairman and Chief Executive Officer |
(e) | Other items |
(3) | Represents charge recorded in connection with the Company’s change in estimating casualty reserves, which impacted Surface Transportation’s full year operating income by $229 million and operating ratio by 3 percent. |
(4) | Represents the charge incurred upon entering into settlement agreements with Maersk. |
(5) | Includes the restructuring charge recorded in connection with the Organizational Effectiveness Initiative and the favorable change in estimate of benefits to be paid under 1991 and 1992 separation plans. |
5
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION TRAFFIC AND REVENUE(1) | ||
Loads (Thousands); Revenue (Dollars in Millions) |
Fourth Quarter Loads | Fourth Quarter Revenue | ||||||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||
Merchandise | |||||||||||||||||
Phosphates and Fertilizers | 116 | 112 | 4 | % | $ | 83 | $ | 79 | 5 | % | |||||||
Metals | 88 | 79 | 11 | 110 | 99 | 11 | |||||||||||
Forest and Industrial Products | 150 | 143 | 5 | 199 | 190 | 5 | |||||||||||
Agricultural and Food | 119 | 118 | 1 | 171 | 169 | 1 | |||||||||||
Chemicals | 136 | 133 | 2 | 249 | 241 | 3 | |||||||||||
Emerging Markets | 120 | 101 | 19 | 116 | 97 | 20 | |||||||||||
729 | 686 | 6 | 928 | 875 | 6 | ||||||||||||
Automotive | 139 | 137 | 1 | 228 | 219 | 4 | |||||||||||
Coal, Coke and Iron Ore | |||||||||||||||||
Coal | 406 | 395 | 3 | 388 | 386 | 1 | |||||||||||
Coke and Iron Ore | 18 | 18 | — | 15 | 15 | — | |||||||||||
424 | 413 | 3 | 403 | 401 | — | ||||||||||||
Other | — | — | — | 9 | 11 | (18 | ) | ||||||||||
Total Rail | 1,292 | 1,236 | 5 | 1,568 | 1,506 | 4 | |||||||||||
Intermodal | |||||||||||||||||
Domestic | 285 | 268 | 6 | 214 | 198 | 8 | |||||||||||
International | 290 | 267 | 9 | 115 | 109 | 6 | |||||||||||
Other | — | — | — | (1 | ) | 2 | (150 | ) | |||||||||
Total Intermodal | 575 | 535 | 7 | 328 | 309 | 6 | |||||||||||
Total Surface Transportation | 1,867 | 1,771 | 5 | % | $ | 1,896 | $ | 1,815 | 4 | % | |||||||
�� | |||||||||||||||||
Year Loads | Year Revenue | ||||||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | %Change | ||||||||||||
Merchandise | |||||||||||||||||
Phosphates and Fertilizers | 460 | 463 | (1 | )% | $ | 329 | $ | 324 | 2 | % | |||||||
Metals | 348 | 319 | 9 | 435 | 401 | 8 | |||||||||||
Forest and Industrial Products | 604 | 590 | 2 | 806 | 771 | 5 | |||||||||||
Agricultural and Food | 457 | 452 | 1 | 660 | 648 | 2 | |||||||||||
Chemicals | 544 | 542 | — | 993 | 964 | 3 | |||||||||||
Emerging Markets | 476 | 424 | 12 | 471 | 398 | 18 | |||||||||||
2,889 | 2,790 | 4 | 3,694 | 3,506 | 5 | ||||||||||||
Automotive | 529 | 538 | (2 | ) | 853 | 845 | 1 | ||||||||||
Coal, Coke and Iron Ore | |||||||||||||||||
Coal | 1,570 | 1,574 | — | 1,543 | 1,529 | 1 | |||||||||||
Coke and Iron Ore | 65 | 70 | (7 | ) | 57 | 69 | (17 | ) | |||||||||
1,635 | 1,644 | (1 | ) | 1,600 | 1,598 | — | |||||||||||
Other | — | — | — | 35 | 54 | (35 | ) | ||||||||||
Total Rail | 5,053 | 4,972 | 2 | 6,182 | 6,003 | 3 | |||||||||||
Intermodal | |||||||||||||||||
Domestic | 1,060 | 982 | 8 | 784 | 696 | 13 | |||||||||||
International | 1,170 | 1,137 | 3 | 469 | 476 | (1 | ) | ||||||||||
Other | — | — | — | 4 | 8 | (50 | ) | ||||||||||
Total Intermodal | 2,230 | 2,119 | 5 | 1,257 | 1,180 | 7 | |||||||||||
Total Surface Transportation | 7,283 | 7,091 | 3 | % | $ | 7,439 | $ | 7,183 | 4 | % |
(1) | Certain prior period traffic has been reclassified to conform to the current presentation. |
6
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION OPERATING RESULTS |
REVENUE
Merchandise
Merchandise showed strong growth in the fourth quarter with revenue and volume up 6 percent. Substantially all markets showed year-over-year improvements in revenue and volume.
• | Phosphates and Fertilizers – Revenues were up 5 percent, largely driven by growth in phosphoric acid, ammonia and potash. Weakness continued in port phosphate rock. |
• | Metals – Quarterly revenue and volume were up 11 percent year over year, largely driven by modal conversions and strong global steel demand, particularly from China, coupled with domestic sourcing changes. Ferrous scrap, as well as sheet steel, plate and aluminum products experienced the most growth. Bar, rod and structural and pipe also grew due to improvements in construction and energy markets. |
• | Forest and Industrial Products – Construction demand during the fourth quarter drove continued growth in building products. Growth in paper products slowed due to reduced box demand and multiple mill shutdowns. |
• | Agricultural and Food – Fourth-quarter volume was slightly ahead of prior year. A large southeast crop displaced midwest feed grain in October. A short bean crop limited buying by forward processors. Strength in wheat and flour, canned goods and exports offset shortfalls in soybeans, sweeteners and vegetable oils. Sweeteners continue to be negatively impacted by source shifts and a plant closure. |
• | Chemical – Recent strengthening continued in the fourth quarter. Nearly all major commodity groupings posted year-over-year increases, led by 7 percent growth in petroleum products and 5 percent growth in plastics and intermediates. This growth offset weakness in glass manufacturing that continued due to plant closures. Liquid petroleum gas results were below last year’s record levels. |
• | Emerging Markets – All lines of business showed significant volume growth versus last year. Fourth-quarter revenues were up 20 percent on 19 percent volume growth. Aggregates and cement traffic grew faster than industry growth rates due to new industrial development and modal conversions. Military volumes showed strength during fourth quarter. Strength also continued in waste markets. |
Automotive
In spite of a 200,000-unit year-over-year production decline, automotive revenues were up 4 percent year over year. Volume strength was driven by modal conversion. Revenue-per-car improvement was driven by length of haul extensions and price.
Coal, Coke and Iron Ore
Coal, coke and iron ore experienced 3 percent volume growth due to gains in southern utilities and export markets. Steel related traffic showed renewed strength due to sourcing demand changes. Strength in export moves continued due to high European steam coal demand for electricity generation.
Intermodal
• | Domestic – Experienced 8 percent revenue growth on 6 percent volume increases due to transloading and new programs. Strength in the Company’s trucking initiative brokerage continued. Parcel sector also showed year-over-year strength. |
• | International – Strength in general import growth, 9 percent in volume, was partially offset by continued international import/export volumes over east coast ports. |
7
CSX Corporation and Subsidiaries | QuarterlyFlash | |
SURFACE TRANSPORTATION OPERATING RESULTS(continued) |
EXPENSE
Labor and Fringe expenses were down $1 million in the fourth quarter of 2003, compared to the fourth quarter of 2002. Benefits of reduced staffing levels and reversal of the Company’s incentive compensation accrual were offset by increased costs relating to wage inflation and system-related overtime.
Materials, Supplies and Other expenses increased $84 million in the fourth quarter of 2003 over fourth quarter 2002 due to increased personal injuries, derailment related costs and prior year property and sales tax reductions.
Conrail Rents, Fees and Services increased $9 million in the fourth quarter of 2003 compared to the same period last year due primarily to favorable tax settlements recorded in 2002 and increases in current year contractual rental arrangements for Shared Area facilities.
Building and Equipment Rent increased $14 million in fourth quarter 2003 compared to fourth quarter 2002 as a result of automotive car hire reclaims and increased merchandise volumes and utilization.
Depreciation was down to $150 million from $161 million in the prior year quarter due to revised depreciation rates which were a result of the Company’s life study and the effect of adopting SFAS 143 in the current year.
Fuel expenses increased $16 million in the fourth quarter 2003 compared to the same period of the prior year primarily due to increased fuel prices.
Restructuring Charge - Net of $12 million in the fourth quarter 2003 represents the cost of CSX’s reorganization charges offset by reductions in 1991/1992 separation reserves.
8
CSX Corporation and Subsidiaries | QuarterlyFlash | |
RAIL OPERATING STATISTICS(1) |
Fourth Quarter | Year | |||||||||||||||||||
2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||||||||
Coal (Millions of Tons) | Domestic: | |||||||||||||||||||
Utility | 35.4 | 34.0 | 4 | % | 134.3 | 133.4 | 1 | % | ||||||||||||
Other | 5.1 | 6.5 | (22 | ) | 23.7 | 24.6 | (4 | ) | ||||||||||||
Total Domestic | 40.5 | 40.5 | — | 158.0 | 158.0 | — | ||||||||||||||
Export | 2.5 | 1.6 | 56 | 8.7 | 9.3 | (6 | ) | |||||||||||||
Total | 43.0 | 42.1 | 2 | 166.7 | 167.3 | — | ||||||||||||||
Revenue Ton-Miles (Billions) | Merchandise | 33.7 | 31.2 | 8 | 133.1 | 125.5 | 6 | |||||||||||||
Automotive | 2.4 | 2.5 | (4 | ) | 8.9 | 9.3 | (4 | ) | ||||||||||||
Coal | 17.7 | 18.0 | (2 | ) | 70.3 | 72.4 | (3 | ) | ||||||||||||
Intermodal | 5.6 | 5.3 | 6 | 21.6 | 21.0 | 3 | ||||||||||||||
Total | 59.4 | 57.0 | 4 | 233.9 | 228.2 | 2 | ||||||||||||||
Gross Ton-Miles(2) (Billions) | Total Gross Ton-Miles | 114.0 | 109.5 | 4 | % | 447.9 | 438.1 | 2 | % | |||||||||||
Service Measurements | Personal Injury Frequency Index (Per 100 Employees) | 2.26 | 1.83 | (23 | )% | 2.20 | 1.98 | (11 | )% | |||||||||||
FRA Train Accidents Frequency (Per Million Train Miles) | 4.60 | 3.87 | (19 | ) | 4.37 | 3.34 | (31 | ) | ||||||||||||
Average, All Trains (Miles Per Hour) | 21.4 | 22.4 | (4 | ) | 21.1 | 22.5 | (6 | ) | ||||||||||||
Average System Dwell Time (Hours) | 26.6 | 24.2 | (10 | ) | 25.3 | 23.2 | (9 | ) | ||||||||||||
Average Total Cars-On-Line | 230,864 | 227,492 | (1 | ) | 229,926 | 229,609 | ||||||||||||||
On-Time Originations | 57.2 | % | 74.3 | % | (23 | ) | 62.0 | % | 76.4 | % | (19 | ) | ||||||||
On-Time Arrivals | 53.2 | % | 73.0 | % | (27 | ) | 56.9 | % | 76.9 | % | (26 | ) | ||||||||
Average Recrews (Per Day) | 52.0 | 31.0 | (68 | )% | 50.0 | 26.0 | (92 | )% |
(1) | Amounts for 2003 are estimated. |
(2) | Amounts exclude locomotive gross ton-miles. |
SURFACE TRANSPORTATION FUEL STATISTICS
Fourth Quarter | Year | ||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||
Diesel No. 2: | |||||||||||||||
Estimated Fuel Consumption (Millions of Gallons) | 152.5 | 146.2 | 591.5 | 572.2 | |||||||||||
Price Per Gallon (Dollars) | $ | 0.9168 | $ | 0.8416 | $ | 0.9564 | $ | 0.7839 | |||||||
Impact of Year-to-Year Price Variance on Operating Expense (Dollars in Millions) | $ | (11.5 | ) | $ | (5.0 | ) | $ | (102.1 | ) | $ | 69.0 |
9
CSX Corporation and Subsidiaries | QuarterlyFlash | |||
INTERNATIONAL TERMINALS |
OPERATING RESULTS
Revenue increased $1 million to $57 million for the 2003 quarter, compared to $56 million in the prior quarter, primarily due to increased volumes at its Hong Kong operations.
Expenses increased $8 million to $40 million for the fourth quarter, compared to $32 million for the 2002 quarter. This was due primarily to a $6 million gain on the divestiture of a portion of its Caucedo terminal ownership recorded as a reduction to miscellaneous expenses in 2002. Also, operating costs were higher at its Hong Kong Operations due to increased volumes in 2003.
Operating income decreased $7 million for the 2003 quarter, as compared to the 2002 quarter, due to the gain mentioned above as well as slightly higher overhead and administrative expenses in the 2003 quarter.
OPERATING STATISTICS(1)
(Unaudited) | ||||||||||||
Fourth Quarter | Year | |||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||
Gross Revenue (Dollars in Millions) | $ | 110 | $ | 98 | $ | 413 | $ | 387 | ||||
Gross Lifts | 886,381 | 528,843 | 3,280,322 | 2,106,762 | ||||||||
Average Port Productivity (Port Moves Per Crane Per Hour) | 31.0 | 30.7 | 31.3 | 31.5 |
(1) | Includes all consolidated and unconsolidated subsidiaries of CSX World Terminals. |
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in Millions, Except Per Share Amounts) (All Per Share Amounts Assume Dilution)
Revenue | Operating Income | Earnings Per Share | |||||||||||||||||||||||||||
2003 | 2002(4) | 2001(4) | 2003(5)(6)(7) | 2002(4) | 2001(1)(4) | 2003(2)(5)(6)(7) | 2002(3) | 2002 | |||||||||||||||||||||
First Quarter | $ | 2,016 | $ | 1,964 | $ | 2,025 | $ | 177 | $ | 212 | $ | 189 | $ | .46 | $ | .12 | $ | .10 | |||||||||||
Second Quarter | 1,942 | 2,073 | 2,057 | 285 | 321 | 265 | .59 | .63 | .51 | ||||||||||||||||||||
Third Quarter | 1,882 | 2,055 | 2,019 | (98 | ) | 276 | 282 | (.48 | ) | .60 | .47 | ||||||||||||||||||
Fourth Quarter | 1,953 | 2,060 | 2,009 | 262 | 318 | 221 | .57 | .64 | .31 | ||||||||||||||||||||
Year | $ | 7,793 | $ | 8,152 | $ | 8,110 | $ | 626 | $ | 1,127 | $ | 957 | $ | 1.14 | $ | 1.99 | $ | 1.38 |
(1) | Fourth quarter 2001 includes a charge of $60 million pretax, $37 million after tax, 17 cents per share, for the settlement of the 1997 New Orleans tank car fire litigation. |
(2) | First quarter 2003 includes a credit of $57 million after tax, 26 cents per share, as a result of a cumulative effect of an accounting change for asset retirement obligations. |
(3) | First quarter 2002 includes a charge of $43 million after tax, 20 cents per share, as a result of the cumulative effect of an accounting change for indefinite lived intangible assets. |
(4) | In the first quarter of 2003, CSX conveyed its interest in CSX Lines. Revenue from CSX Lines is included in previous quarters of $189 million in fourth quarter of 2002 and $171 million in fourth quarter of 2001. CSX Lines’ operating income of $6 million and $11 million is included in the fourth quarters of 2002 and 2001, respectively. |
(5) | In the third quarter of 2003, the Company changed its estimate of casualty reserves to include an estimate of incurred but not reported claims for asbestos and other occupational injuries. In conjunction with the change in estimate, the Company recorded a charge of $232 million, $145 million after tax, 68 cents per share, in the third quarter of 2003 to increase its provision for casualty claims. |
(6) | In the third quarter, CSX entered into two settlement agreements with Maersk which resolved all material disputes pending between the companies arising out of the 1999 sale of the international container-shipping assets. The effect is to reduce the Company’s earnings by $108 million pretax, $67 million after tax, or 31 cents per share. This charge is reflected in the financial statements as the additional loss on sale of the international container-shipping assets. |
(7) | In the fourth quarter of 2003, the Company recorded $34 million pretax, $21 million after tax, 10 cents per share, as the initial charge for separation expenses related to the Organizational Effectiveness Initiative announced in November 2003. In addition, the Company recorded a $22 million pretax, $14 million after tax, 6 cents per share, credit related to revised estimates for railroad retirement taxes and the amounts of benefits to be paid to individuals under the $1.3 billion charges for separation plans initially recorded in 1991 and 1992. |
10
CSX Corporation and Subsidiaries | QuarterlyFlash | |||
FINANCIAL MEASURES (Unaudited) |
Years Ended | ||||||||
Dec. 26, 2003 | Dec. 27, 2002 | |||||||
Working Capital Deficit (Dollars in Millions) | $ | (319 | ) | $ | (630 | ) | ||
Current Ratio | 0.9 | 0.7 | ||||||
Commercial Paper - Short-term (Dollars in Millions) | $ | 2 | $ | 143 | ||||
Debt Ratio(1) | 51 | % | 52 | % | ||||
All-in Debt Ratio(2) | 54 | % | 57 | % | ||||
12-Month Rolling Return on Assets | 0.9 | % | 2.2 | % | ||||
12-Month Rolling Return on Equity | 3.0 | % | 7.5 | % |
(1) | Adjusted to include 42 percent of Conrail obligations. |
(2) | Adjusted to include off-balance sheet financing, leases, and 42 percent of Conrail obligations. |
OTHER INCOME (EXPENSE)(1) (Unaudited)
(Dollars in Millions)
Quarters Ended | Years Ended | |||||||||||||||
Dec. 26, 2003 | Dec. 27, 2002 | Dec. 26, 2003 | Dec. 27, 2002 | |||||||||||||
Interest Income | $ | 5 | $ | 5 | $ | 21 | $ | 27 | ||||||||
Income from Real Estate and Resort Operations | 37 | 20 | 95 | 108 | ||||||||||||
Discounts on Sales of Accounts Receivable | — | (6 | ) | (10 | ) | (26 | ) | |||||||||
Minority Interest | (10 | ) | (11 | ) | (42 | ) | (42 | ) | ||||||||
Equity in Losses of Other Affiliates | 2 | 2 | 2 | (3 | ) | |||||||||||
Miscellaneous | (7 | ) | (10 | ) | (9 | ) | (23 | ) | ||||||||
Total | $ | 27 | $ | — | $ | 57 | $ | 41 | ||||||||
Gross Revenue from Real Estate and Resort Operations Included in Other Income | $ | 90 | $ | 56 | $ | 274 | $ | 261 |
(1) | Prior periods have been reclassified to conform to current presentation. |
11
CSX Corporation and Subsidiaries | QuarterlyFlash | |||
EBITDA (Unaudited) |
(Dollars in Millions)
This computation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is presented because management believes it is a financial indicator used by investors and analysts to evaluate companies on the basis of operating performance. This is not considered to be better information than is available in the Company’s publicly available reports filed with the Securities and Exchange Commission and does not conform with generally accepted accounting principles. CSX owns a 42 percent undivided interest in Conrail Inc., and operates over a portion of the Conrail territory under the terms of an operating agreement. Conrail loans its excess cash to its owners under loan agreements at market interest rates. The calculation of EBITDA combines CSX and Conrail financial data for analytical purposes only and is not intended to suggest that CSX has control over Conrail’s operations.
CSX Consolidated | 42% of Conrail | Other(2) | Combined EBITDA | |||||||||||||||||||||||||||||
2003(1) | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||
Quarters Ended Dec. 26, 2003, and Dec. 27, 2002 | ||||||||||||||||||||||||||||||||
Net Earnings (Loss), as adjusted | $ | 130 | $ | 137 | $ | 20 | $ | 20 | $ | (20 | ) | $ | (20 | ) | $ | 130 | $ | 137 | ||||||||||||||
Depreciation and Amortization | 154 | 168 | 34 | 33 | 22 | 28 | 210 | 229 | ||||||||||||||||||||||||
Interest Income | (5 | ) | (5 | ) | (2 | ) | (3 | ) | 3 | 4 | (4 | ) | (4 | ) | ||||||||||||||||||
Discounts on Sales of Accounts Receivable | — | 6 | — | — | — | — | — | 6 | ||||||||||||||||||||||||
Interest Expense | 107 | 107 | 10 | 11 | (3 | ) | (8 | ) | 114 | 110 | ||||||||||||||||||||||
Income Tax Expense, as adjusted | 64 | 74 | 10 | 5 | (4 | ) | (7 | ) | 70 | 72 | ||||||||||||||||||||||
Combined EBITDA | $ | 450 | $ | 487 | $ | 72 | $ | 66 | $ | (2 | ) | $ | (3 | ) | $ | 520 | $ | 550 | ||||||||||||||
Years Ended Dec. 26, 2003, and Dec. 27, 2002 | ||||||||||||||||||||||||||||||||
Net Earnings (Loss) Before Cumulative Effect of Accounting Change, as adjusted | $ | 414 | $ | 467 | $ | 68 | $ | 76 | $ | (68 | ) | $ | (76 | ) | $ | 414 | $ | 467 | ||||||||||||||
Depreciation and Amortization | 629 | 638 | 138 | 135 | 88 | 91 | 855 | 864 | ||||||||||||||||||||||||
Interest Income | (21 | ) | (27 | ) | (8 | ) | (10 | ) | 7 | 8 | (22 | ) | (29 | ) | ||||||||||||||||||
Discounts on Sales of Accounts Receivable | 10 | 26 | — | — | — | — | 10 | 26 | ||||||||||||||||||||||||
Interest Expense | 418 | 445 | 42 | 44 | (7 | ) | (8 | ) | 453 | 481 | ||||||||||||||||||||||
Income Tax Expense, as adjusted | 213 | 256 | 39 | 34 | (22 | ) | (23 | ) | 230 | 267 | ||||||||||||||||||||||
Combined EBITDA | $ | 1,663 | $ | 1,805 | $ | 279 | $ | 279 | $ | (2 | ) | $ | (8 | ) | $ | 1,940 | $ | 2,076 |
(1) | CSX consolidated net earnings for 2003 has been adjusted and a reconciliation follows: |
CSX Consolidated 2003 | ||||||||
Quarter | Year | |||||||
Net earnings, as adjusted | $ | 130 | $ | 414 | ||||
Provision for casualty reserves, net of income tax | — | (145 | ) | |||||
Final loss on sale, net of income tax | — | (67 | ) | |||||
Restructuring charge, net of income tax | (7 | ) | (13 | ) | ||||
Net earnings before cumulative effect of accounting change, per income statement | $ | 123 | $ | 189 | ||||
(2) | Other includes purchase price amortization, eliminations and reclassifications. |
12
CSX Corporation and Subsidiaries | QuarterlyFlash | |||
EMPLOYEE COUNTS BY SEGMENT - ESTIMATED(1) |
2003 | 2002 | |||||||||||||||
Nov. | Aug. | May | Feb. | Nov. | Aug. | May | Feb. | |||||||||
Surface Transportation | ||||||||||||||||
Rail | 32,160 | 33,245 | 33,533 | 32,547 | 33,378 | 34,020 | 33,977 | 33,036 | ||||||||
Intermodal | 1,114 | 1,115 | 1,115 | 1,122 | 1,124 | 1,110 | 1,077 | 1,063 | ||||||||
Technology and Corporate | 810 | 839 | 858 | 887 | 900 | 912 | 896 | 878 | ||||||||
Total Surface Transportation | 34,084 | 35,199 | 35,506 | 34,556 | 35,402 | 36,042 | 35,950 | 34,977 | ||||||||
International Terminals | 1,001 | 1,006 | 1,013 | 1,035 | 1,238 | 1,242 | 1,264 | 1,275 | ||||||||
Other | 1,623 | 1,851 | 1,752 | 1,129 | 3,165 | 3,388 | 3,161 | 2,657 | ||||||||
Total | 36,708 | 38,056 | 38,271 | 36,720 | 39,805 | 40,672 | 40,375 | 38,909 |
(1) | Prior periods have been reclassified to conform to current presentation |
13